Choosing the right health insurance plan: HMO vs. PPO

When selecting a health insurance plan, it’s essential to consider various factors to meet your individual needs effectively. Two common plan types you’ll encounter are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO). Understanding the differences between these options is crucial for making a well-informed decision.

Before we get started:

What is an HMO?

Health Maintenance Organizations (HMOs) operate by establishing a network of healthcare providers, including physicians and hospitals, who deliver services at agreed-upon rates. This structured approach allows HMOs to effectively manage costs for their members, offering predictable expenses and a carefully curated selection of healthcare options.

What is a PPO?

Preferred Provider Organizations (PPOs) offer access to a network of healthcare providers who deliver medical services at negotiated rates. Unlike HMOs, PPOs afford individuals the flexibility to receive care from any healthcare provider, regardless of whether they are within or outside the established network. However, it’s essential to recognize that certain PPO plans may require referrals for specific services.

HMO vs. PPO plans: What’s the difference?

Choosing between an HMO and a PPO health plan doesn’t need to be overly complicated. The primary differences revolve around the breadth of the healthcare provider network, the extent of coverage for in-network versus out-of-network care, and the monthly premium.

Typically, HMO plans offer lower monthly premiums compared to similar PPO plans with equivalent deductible and out-of-pocket maximum benefits.

CareFirst’s PPO plans provide access to an extensive network of providers. Conversely, in exchange for a reduced monthly premium, HMO plans offer a more limited selection of doctors, hospitals, and specialists. CareFirst has designed its plans with patient autonomy in mind, ensuring that even the HMO plan includes a broader network of healthcare professionals than many other health insurance providers.

To simplify your decision-making process, we’ve created a straightforward comparison chart outlining the key features of HMOs and PPOs. Equipped with a clearer understanding of each plan type and its functions, you can confidently choose the plan that best suits your and your family’s needs.

HMO health maintenance organization
PPO preferred provider organization
How much will this plan cost?
 Lower cost
HMO plans generally offer lower monthly premiums, which can translate to decreased out-of-pocket costs for policyholders.
 Higher cost
PPO plans typically come with higher monthly premiums, providing enhanced flexibility to utilize both in-network and out-of-network healthcare providers without the need for a referral. Nonetheless, policyholders may face increased out-of-pocket medical expenses with a PPO plan.
Do I have to use a primary care physician (PCP)?
In the majority of HMO plans, all healthcare services are overseen and coordinated by your assigned Primary Care Physician (PCP).


PPO plans typically do not require referrals for any services.
Do I have to get referrals to use another doctor?


In the framework of an HMO, the initial protocol involves scheduling an appointment with your Primary Care Physician (PCP). If deemed necessary, your PCP will then provide a referral to an appropriate specialist within the network.


PPO plans do not necessitate referrals for any services.
If I have a doctor or a specialist who is out of network, will I still be able to see him or her and have the costs covered?


HMOs typically do not offer coverage for services provided by healthcare providers outside of their designated network, except in cases of genuine medical emergencies.


In a PPO plan, individuals have the flexibility to receive healthcare services from providers outside of their designated network. However, utilizing out-of-network providers often results in higher fees and may require a separate deductible.

Will I need to file claims?


Corrected: In HMOs, visits are limited to in-network providers, which reduces the need to file claims. This is because the insurance company directly compensates the healthcare provider for covered services.


In certain situations, you might be required to pay healthcare providers directly for the services provided and then submit a claim to receive reimbursement. This usually happens when you seek services from providers who are not part of your network.

In broad terms, selecting an HMO plan may be advisable if minimizing expenses and being comfortable with a primary care physician (PCP) coordinating your healthcare are key priorities. Conversely, a PPO plan might be more suitable if you have specific healthcare providers you prefer to retain, even if they are outside your plan’s network.

7 Differences Between an HMO vs. PPO

If the terminology related to health insurance appears complex, there’s no need for concern. Let’s explore some of the primary differences between these two commonly encountered types of health insurance plans.

1. HMOs have lower premiums and out-of-pocket expenses but less flexibility.

One of the key advantages of HMOs is their lower premiums and out-of-pocket expenses. However, these reduced costs often come with a trade-off: a more limited network of providers, which can restrict flexibility in choosing healthcare facilities. In an HMO, obtaining a referral from your primary care physician (PCP) to see an in-network specialist is typically required.

Essentially, HMOs carefully manage what they deem medically necessary services, which helps control overall plan expenses.

2. PPOs have higher premiums but more flexibility.

In opting for a PPO, expect a higher monthly premium, but this investment grants you access to a wider selection of healthcare providers and the autonomy to consult specialists without needing a referral from your PCP. If you anticipate needing specialized care often or prefer fewer restrictions on out-of-network providers, the PPO plan may better align with your needs.

3. HMOs have a low or no annual deductible.

Another advantage of an HMO is its typically minimal or even nonexistent annual deductible. This means that policyholders may face potentially no out-of-pocket expenses before their insurance coverage kicks in.

4. PPOs typically have a higher deductible but there’s a reason why.

In a PPO plan, the deductible, akin to the monthly premium, tends to be higher than that of an HMO. This elevated cost is indicative of the broader network of healthcare providers and enhanced flexibility in selecting specialists and medical facilities.

5. Count on a copay with an HMO.

In an HMO plan, each non-preventive medical visit typically incurs a copayment, a fixed amount paid for covered services. Whether it’s a routine check-up or a visit for an illness like the flu, you can expect to pay a copayment. However, for preventive services like annual physicals, copayments are often waived.

Furthermore, seeking care outside your network entails bearing the full cost of medical services. Therefore, it’s advisable to utilize in-network providers to avoid additional expenses. It’s worth noting that HMOs usually offer limited flexibility regarding specialist visits, requiring a referral from your primary care physician for such consultations.

6. Do PPOs have a copay? Maybe yes. Maybe no.

The inclusion of copayments in PPO plans varies depending on the specific policy. To ascertain whether copayments are part of your PPO plan, it’s advisable to consult with your employer or health insurance provider for clarification.

7. HMOs and PPOs could be HDHPs.

Let’s clarify! PPOs have historically been the preferred choice among employers for health insurance plans. However, in recent years, High Deductible Health Plans (HDHPs) have garnered attention as a strategy to mitigate healthcare costs for employees. As of 2020, a plan qualifies as an HDHP if it carries a minimum annual deductible of $1,400 for single coverage or $2,800 for family coverage.

Opting for an HDHP might lead to a lower monthly premium, particularly if you’re in good health and require minimal medical attention. While it’s possible for an HMO to qualify as an HDHP, it’s less common due to one of the primary advantages of an HMO—its low or nonexistent annual deductible.

With an HDHP, you also gain the advantage of eligibility for a Health Savings Account (HSA). This account enables tax-free deposits and withdrawals, which can be utilized for various qualified medical expenses.

In-depth: HMOs

HMO, or Health Maintenance Organization, is a healthcare model that comprises a network of providers, including physicians and hospitals, who agree to offer services at negotiated rates. In HMO plans, individuals usually select a Primary Care Physician (PCP), responsible for overseeing their healthcare and making referrals to specialists when necessary.

Coverage within an HMO is generally limited to in-network providers, except for emergencies, which may be covered out-of-network. Moreover, ancillary services like laboratory tests are typically restricted to designated providers within the HMO network.

Compared to PPO plans, HMOs often offer lower monthly premiums, making them appealing for individuals whose preferred providers are within the network or those who primarily seek care locally.

In-depth: PPOs

A PPO, or Preferred Provider Organization, is a network comprising healthcare providers who agree to deliver services at negotiated rates. Unlike an HMO, individuals enrolled in a PPO plan have the freedom to seek care from providers outside the network, although this may result in higher copays or out-of-pocket expenses.

Generally associated with higher monthly premiums, PPO plans offer greater flexibility. Unlike HMOs, PPO members are not required to choose a primary care physician and can consult any healthcare provider, including specialists, without referrals. This flexibility extends to travel situations, allowing members to access care wherever they are.

Additionally, PPO plans provide a wider selection of laboratory service providers, giving members the option to choose the most convenient location for lab work within the network.

Things To Consider When Choosing Between HMO and PPO:

When assessing the appropriateness of a health insurance plan for yourself and your family, it is prudent to consider the following factors:

Do you need a lower monthly payment?

Examine and compare the monthly premiums associated with both HMO and PPO plans. If you prioritize affordability and seek a lower monthly fee, considering an HMO plan would be advisable.

Do you stay close to home, or do you travel a lot?

If you often travel and anticipate needing medical care while away from your primary location, especially if you have a chronic condition or engage in high-risk activities like certain sports, a PPO plan may provide broader coverage suitable for your situation.

Conversely, if you require frequent specialist care, especially for managing a rare or chronic condition, you might find the accessibility and immediate access to specialists offered by an HMO plan more advantageous.

Individuals who predominantly receive medical care locally or from a family physician may find that an HMO plan better aligns with their coverage needs.

If you already have a doctor you like, does the plan you are considering cover visits with him or her?

While CareFirst’s HMO plans offer extensive networks, the PPO plans provide even broader coverage for healthcare providers. If retaining your current doctor is essential, you can verify their network status under both HMO and PPO plans.

Choosing the right health plan can offer peace of mind, ensuring that your insurance effectively meets your healthcare requirements.

Medicare HMO and PPO

For individuals who qualify or are aged 65 and above, Medicare provides both PPO and HMO options. If you fall within this demographic, you may want to explore Humana’s Medicare PPO plan or Humana’s Medicare HMO plan.

HMO vs. PPO: Which Is Right for You?

The primary distinctions between an HMO and a PPO lie in several key factors:

1. Cost: HMOs typically offer lower premiums and out-of-pocket costs compared to PPOs.
2. Size of the plan network: PPOs generally have larger networks of healthcare providers, offering more choices for patients.
3. Access to specialists: While HMOs often require referrals from primary care physicians to see specialists, PPOs allow patients to visit specialists without referrals.
4. Coverage for out-of-network services: PPOs provide coverage for out-of-network services, albeit at higher costs, whereas HMOs usually offer limited or no coverage for out-of-network care.

For those in good health with minimal medical needs, an HMO may suffice. However, individuals with ongoing medical concerns or a preference for provider flexibility may find a PPO more suitable.

Navigating health insurance options can be complex, and seeking assistance is often wise. Our partners at Health Trust Financial specialize in guiding individuals toward the most suitable health insurance plans for their unique needs. With over two decades of experience serving Ramsey fans, they connect clients with independent insurance agents who offer personalized advice throughout the selection process. Having expert guidance can lead to cost savings and help individuals achieve their financial and healthcare goals more efficiently.

Making your decision

Now that you’ve gained insight into the significant differences between the two insurance types, you may have a clearer understanding of which option aligns best with your needs.

However, if you find yourself still deliberating on individual medical plans and seek further information to inform your decision, we encourage you to explore our comprehensive overviews of PPO and HMO plans on our website.

Amy Danise

Amy Danise is the managing editor for and Forbes Advisor's insurance section, covering auto, home, renters, life, pet, travel, health, and small business insurance. With over 30 years in the insurance sector, she specializes in simplifying complex insurance topics into actionable information. Amy collaborates with her team to translate insurance jargon into clear language for consumers, helping them understand insurance costs and find top-rated companies. Leveraging her extensive industry contacts, she develops Forbes Advisor's insurance content and analyzes state regulatory filings for insights. Amy's expertise has earned her features in major news outlets like The New York Times and The Wall Street Journal. She holds a Bachelor's degree in American Studies from Wesleyan University.

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